Teapublicans, Social Security And Ronald Reagan

"Ponzi scheme!", "bankrupt", "liberal conspiracy". These are terms you often hear from the teapublication party and radical conservatives when describing the Social Security program. The issue with those terms is that they're all false. Whether it's your conservative uncle around the dinner table, conservative mouth pieces like Rush Limbaugh or the Tea Party members of congress, these flat-out lies are being told across the country.

Social Security is important in people's lives, especially retirees who rely on these benefits. Social Security is not part of the budget and doesn't contribute one nickel to the national debt. Social Security is part of a payroll tax, which is 100% solvent until the year 2038, and can pay out over 80% of the benefits until 2085. Social Security, from its creation under one of our countries greatest presidents Franklin Delano Roosevelt, has been one of the most successful programs the government has ever provided its people.

While Social Security is solvent for the short-term, there are long-term issues with the program that stem from situations that occurred over thirty years ago. In the 1980s, Republican President Ronald Reagan cut tax rates drastically. In 1980 the top tax rate was 70%, which was cut to 50% by 1984 and finally down to 28% by the time Reagan left office in 1988. Supply side economics, or "Reaganomics", was the economic system that Reagan used and was the idea that giving wealthy Americans more money would create jobs which would then "trickle down" to other Americans.

The supply side theory didn't exactly work as planned and Reagan needed a way to make up for the loss in revenue. Reagan ended up tripling the debt while congress raised the debt limit 18 times during his presidency without hesitation. With the lack of revenue coming into the government, Reagan needed a way to keep his fiscal house in order. In addition to raising the debt limit, Reagan also raised taxes multiple times and he did it on the middle class by attacking Social Security.

In 1987, Ronald Reagan appointed veteran business man Alan Greenspan to become Chairman of the Federal Reserve. Before he stepped into his new job, Greenspan already had a big impact on American economics. Under the advice of Greenspan, Reagan took money from the Social Security trust fund to help pay down the debt. The payroll tax was raised in 1983, and the government spent the surplus of Social Security each year to help pay down the giant debt that Reagan created by giving the wealthiest Americans more money each year with the promise of "job creation" for the middle class.

When teapublicans scream about "big government spending" today, they fail to mention that their party was a major reason behind our debt getting out of control. When it comes to Social Security, we need to eliminate the "cap" that is on the program. The cap currently is at $106,800. Anyone who makes more than $106,800 doesn't get taxed for Social Security on their additional income. A person making a million dollars is only paying into the Social Security system 10% of their income, compared to someone making $50,000 a year who is taxed for Social Security on 100% of their income. Shared sacrifice? Not so much.

The "golden child" of the teapublican party, Ronald Reagan, was the man who started the problems for Social Security and the teapublicans have been scaring the American people, especially the elderly, ever since. Social Security is solvent, but we wouldn't even be having the discussion about its future if it wasn't for Ronald Reagan.

 

NFTOS
STAFF

Social Security and the Ponzi Experiment

Texas Gov. Rick Perry emphatically states that Social Security is a “Ponzi Scheme”.

Sometimes campaign spin works to distance a candidate from his controversial past statements. And sometimes the candidate comes back and makes a hash of all the work his staff has done for him.

We could be witnessing the latter scenario when it comes to Texas Gov. Rick Perry (R) and one of the nation's most popular government programs. Last week, Perry's campaign spokesperson took to the Wall Street Journal to help back Perry off the less election-friendly sections of his book, Fed Up!. That includes Perry's suggestion that Social Security is an unconstitutional scheme which should be privatized post-haste.  

Over this past weekend, Perry walked all that back and fired off some more fiery rhetoric about the perils of the entitlement program that most Americans do not want to see changed.

"It is a Ponzi scheme for these young people," Perry said in Iowa, mimicking his pre-presidential campaign language on the subject of Social Security:

"The idea that they're working and paying into Social Security today, that the current program is going to be there for them, is a lie," Perry added. "It is a monstrous lie on this generation, and we can't do that to them."

Charles Ponzi, an Italian immigrant, started this first such scheme in Boston in 1916. He convinced some people to allow him to invest their money, but he never made any real investments. He just took the money from later investors and gave it to the earlier investors, paying them a handsome profit on what they originally paid in. He then used the early investors as advertisements to get more investors, using their money to pay a profit to previous investors, and so on.

To keep paying a profit to previous investors, Ponzi had to continue to find more and more new investors. Eventually, he couldn't expand the number of new investors fast enough and the system collapsed. Because he never made any real investments, he had no funds to pay back the newer investors. They lost all the money they "invested" with Ponzi.

Ponzi was convicted of fraud and sent to prison for two years. When he came out, he returned to Italy, where he became a top economic adviser to Benito Mussolini.

Quoting NFTOS editor and Chief Roger West…..”Just like Ponzi's plan, The pundits along with the CATO institute  (co-founder is Charles Koch) state that Social Security does not make any real investments -- it just takes money from later "investors," or taxpayers, to pay benefits to earlier, now retired, taxpayers. Like Ponzi, Social Security will not be able to recruit new "investors" fast enough to continue paying promised benefits to previous investors. Because each year there are fewer young workers relative to the number of retirees, Social Security will eventually collapse, just like Ponzi's scheme.”



What's more, Perry also said "I haven't backed off anything in my book." Not surprisingly, Democrats jumped all over the quotes. Perry's re-embrace of the Social Security-as-Ponzi scheme thing is likely to endear him further to the tea party types who already support his campaign in big numbers. But polls have shown even the tea party doesn't want to see cuts to Social Security, showing just how dangerous grabbing onto this particular political third rail can be.

So Perry's got a dilemma -- does he stick to his guns on Fed Up!, giving him the sort of "genuine" cred conservative voters crave in a primary candidate? Or does he go the way his staff seems to be suggesting, which frees him from attack-ads-in-a-can like the Ponzi Scheme line? For now it looks like Perry's more interested in staying "real" than becoming more electable.

We leave you with this thought, If George Bush was cancer, and President Obama is chemo, Rick Perry is what it looks like when the cancer returns.



NFTOS